EXECUTIVE SUMMARY
- MNI US: Speaker Johnson Eyes Short-Term Continuing Resolution
- MNI JPY: Ueda Effect Keeps JPY Activity Well Ahead of G10 Peers
- MNI SECURITY: White House Envoy Hochstein To Travel To Lebanon For Ceasefire Talks
- MNI US DATA: Dallas Fed Survey Sees Strong Future Loan Demand
- MNI US DATA: NAHB Index Surprises Higher On Future Sales Optimism
MNI US TSYS: Tsys Off Lows, Focus on President Elect Cabinet Positions
- Treasuries look mixed after the bell, well off early session lows with 2s-10s making modest gains. Curves mixed, however, 2s10s -.053 at 13.140, 5s30s +1.954 at 32.802.
- Muted reaction to data: NAHB housing market index surprised higher at 46 (cons 42) in November after 43, for its highest since April. The 3pt increase was driven by expectations for future sales (+7) which at 64 is now its highest since Apr 2022.
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs. Latest reports suggest that Trump's shortlist is growing, and he is to hold interviews this week with the leading candidates, including (but not limited to) Scott Bessent, Howard Lutnick, Kevin Warsh and Marc Rowan.
- Their perceived support for Trump's tariff regime will prove key to any market reaction on the formal appointment. Midmorning headlines announced the Trump team supports Fed Governor Kevin Warsh, deemed a both a fiscal and monetary hawk
- On tap for Tuesday: Building Permits & Housing Starts at 0830ET, BLS releases State-level payrolls and unemployment data for Oct at 1000ET. US Treasury auctions $80B 42D CMBs. Fed speak: KC Fed Schmid economic outlook (text TBA, Q&A) at 1310ET.
NEWS
MNI US: Speaker Johnson Eyes Short-Term Continuing Resolution
House Speaker Mike Johnson (R-LA) told Fox News Sunday that he is leaning towards a short-term three-month Continuing Resolution to punt government funding until after Donald Trump is inaugurated and Republicans control both chambers of Congress. Johnson said: “We’re running out of clock. Dec. 20 is the deadline. We’re still hopeful that we might be able to get that done, but if not, we’ll have a temporary measure. I think that would go into the first part of next year and allow us the necessary time to get this done.”
MNI SECURITY: White House Envoy Hochstein To Travel To Lebanon For Ceasefire Talks
Barak Ravid at Axios reporting that US President Joe Biden's Middle East Envoy, Amos Hochstein "will soon fly to Beirut for talks on the cease-fire agreement, according to a senior American." Ravid's comments come after conflicting reportsthat Hochstein's trip had been delayed pending clarity on the Lebanese position regarding the cease-fire agreement.
MNI JPY: Ueda Effect Keeps JPY Activity Well Ahead of G10 Peers
Currency futures volumes sit well below average for this time of day, with EUR markets seeing activity of 40% below average, GBP ~30% below and AUD 32% below what you'd expect to see. JPY is the standout here, with USD/JPY volatility across Asia-Pac hours helping prop up activity well ahead of the UK close - and as a consequence JPY futures volumes are ~25% higher.
MNI UKRAINE: After Biden Allows Long-Range Missile Use, EU's Borrell Calls For Same
EU High Representative for Foreign Affairs and Security Policy Josep Borrell has called for EU member states to allow Ukraine to use long-range missiles made in the Union to hit targets inside the Russian Federation. Borrell's call comes after US President Joe Biden announced a major shift in US policy with regards to the war in allowing Ukraine to strike inside Russia with US-made ATACMS missiles.
MNI SECURITY: Russia Warns Of 'Tangible' Response If Kyiv Strikes Targets Within RF
Reuters reporting comments from the Russian Foreign Ministry stating: "Kyiv's use of long-range missiles to attack our territory would mean direct involvement of US and "its satellites" in hostilities against Russia." The Ministry adds: "In this case Russia's response will be adequate and tangible." The comments come after a decision by US President Joe Biden to remove some restrictions on Ukraine's use of US-supplied long-range weapons to strike targets within the Russian Federation.
"Iran ‘pushing’ Hezbollah to end war with Israel" Telegraph
Iran’s supreme leader is said to be pushing Hezbollah towards a ceasefire with Israel as US mediators head to Lebanon to try to broker a deal. Ali Larijani, a senior adviser to Ayatollah Ali Khamenei, passed messages to the Lebanese terror group on Friday that said he supported ending the conflict, two Iranians affiliated with Iran’s Revolutionary Guards (IRGC) said.
OVERNIGHT DATA
MNI US DATA: Dallas Fed Survey Sees Strong Future Loan Demand
- The Dallas Fed banking conditions survey, released 'from' 1030ET today and by being collected through Nov 5-13 offers a first look at post-election potential lending behavior, shows broadly similar findings to the prior survey six weeks ago.
- Current loan demand continued to decline modestly whilst future loan demand maintained the particularly strong increase seen in the early October survey.
- The latter is still impressive though considering 10Y Treasury yields increased circa 60bps between the two survey periods.
- The continued tightening in credit standards tallies with the recent Oct 2024 survey from the NY Fed which showed rejection rates for autos and mortgage refinancing hit series highs.
- NPLs offered a mixed picture, with current NPLs reversing the relative improvement seen in October but with expectations of future NPLs showing a notable improvement as the net share expecting increases fell to just 4.5% from 20.5% in October and 35.6% in mid-August.
MNI US DATA: NAHB Index Surprises Higher On Future Sales Optimism
- The NAHB housing market index surprised higher at 46 (cons 42) in November after 43, for its highest since April.
- The 3pt increase was driven by expectations for future sales (+7) which at 64 is now its highest since Apr 2022.
- Present sales (+2) and prospective buyer traffic (+3) both saw more limited increases.
- Gains in the overall index were firmly mixed by major region, concentrated in the northeast (+7) and midwest (+6) vs the west (-5) and south (-1), rather than a widespread expectation of improved housing demand.
- The increase in homebuilder sentiment follows a period of notable relative pessimism compared to what have been elevated price to book ratios for S&P 500 homebuilders.
MNI: US TSY TICS NET FLOWS IN SEP +$398.4B
- MNI: US TSY TICS NET FLOWS IN SEP +$398.4B
- US TSY TICS NET L-T FLOWS IN SEP +$216.1B
MNI CANADA: MNI CPI Preview: Headline Seen Firming Back Near Target Mid-Point
The Canada October CPI report is released Tuesday, Nov 19, at 0830ET and should again receive only modest cross-market interference with US data limited to housing starts/building permits at that time.
- Consensus sees headline CPI firming three tenths to 1.9% Y/Y, back close to the 2% target mid-point having dipped below it in September for the first time (on a rounded basis) since early 2021.
- The BoC’s preferred core measures meanwhile are seen broadly unchanged at 2.4% Y/Y after 2.35% Y/Y, whilst a more traditional CPIxFE is seen easing to circa 2.2% Y/Y after two months at 2.36% Y/Y.
- Headline CPI should be left tracking a little below the 2.1% the BoC forecast for Q4 but with core a touch higher than the 2.3% forecast.
- This is the only CPI release between Oct and Dec BoC meetings. Markets lean fractionally in favour of a reversion to a 25bp cut rather than a second 50bp cut but it’s still broadly a 50/50 call at this stage.
- CAD net shorts and Can-US 2Y yield differentials are historically stretched ahead of the data.
See the full report here: CanadaCPIPrevNov2024.pdf
MNI CANADA DATA: October Housing Starts +8% to 240,761 units
- 6M moving average in October was flat at 243,522 units.
- YTD starts are flat at 188,567 units, Canada Mortgage and Housing Corp says Monday.
- Monthly result compares to economist consensus for 240k units.
MARKETS SNAPSHOT
Key market levels of markets in late NY trade:
DJIA down 55.39 points (-0.13%) at 43389.6
S&P E-Mini Future up 24.5 points (0.42%) at 5921.25
Nasdaq up 111.7 points (0.6%) at 18791.81
US 10-Yr yield is down 2.2 bps at 4.4178%
US Dec 10-Yr futures are up 2/32 at 109-19
EURUSD up 0.0052 (0.49%) at 1.0592
USDJPY up 0.32 (0.21%) at 154.62
WTI Crude Oil (front-month) up $2.05 (3.06%) at $69.06
Gold is up $46.93 (1.83%) at $2610.18
European bourses closing levels:
EuroStoxx 50 down 4.52 points (-0.09%) at 4790.33
FTSE 100 up 45.71 points (0.57%) at 8109.32
German DAX down 21.62 points (-0.11%) at 19189.19
French CAC 40 up 8.6 points (0.12%) at 7278.23
US TREASURY FUTURES CLOSE
3M10Y -2.885, -10.108 (L: -11.288 / H: -3.199)
2Y10Y -0.067, 13.126 (L: 10.676 / H: 16.491)
2Y30Y +1.508, 32.464 (L: 28.071 / H: 35.929)
5Y30Y +2.07, 32.918 (L: 29.875 / H: 34.511)
Current futures levels:
Dec 2-Yr futures up 0.5/32 at 102-21.375 (L: 102-18.87 / H: 102-22)
Dec 5-Yr futures up 1.5/32 at 106-20.25 (L: 106-12.5 / H: 106-22.25)
Dec 10-Yr futures up 1.5/32 at 109-18.5 (L: 109-04.5 / H: 109-22)
Dec 30-Yr futures down 1/32 at 116-9 (L: 115-09 / H: 116-20)
Dec Ultra futures down 10/32 at 122-11 (L: 121-00 / H: 122-31)
MNI US 10YR FUTURE TECHS: (Z4) Bearish Trend Condition
- RES 4: 112-22 High Oct 16 and a key short-term resistance
- RES 3: 111-20 50-day EMA
- RES 2: 111-14+ High Oct 25
- RES 1: 109-30+/110-14+ High Nov 13 / 20-day EMA
- PRICE: 109-17 @ 1310 ET Nov 18
- SUP 1: 108-18+ 1.236 proj of the Oct 1 - 10 - 16 price swing
- SUP 2: 108-03 1.382 proj of the Oct 1 - 10 - 16 price swing
- SUP 3: 108-00 Round number support
- SUP 4: 107-23 2.0% 10-dma envelope
The trend outlook in Treasuries is unchanged. It remains bearish and the contract is trading just above last week’s low print. Moving average studies are in a bear-mode set-up too, highlighting a clear downtrend. Sights are on 108-18+ next, a Fibonacci projection. Further out, the focus is on 108-00. Initial firm resistance is unchanged at the 20-day EMA. The average is at 110-14+.
SOFR FUTURES CLOSE
Dec 24 -0.003 at 95.543
Mar 25 -0.005 at 95.785
Jun 25 +0.005 at 95.975
Sep 25 +0.015 at 96.080
Red Pack (Dec 25-Sep 26) +0.010 to +0.015
Green Pack (Dec 26-Sep 27) +0.010 to +0.010
Blue Pack (Dec 27-Sep 28) +0.005 to +0.010
Gold Pack (Dec 28-Sep 29) +0.005 to +0.005
SOFR FIXES AND PRIOR SESSION REFERENCE RATES
SOFR Benchmark Settlements:
- 1M -0.00428 to 4.60617 (-0.00603 total last wk)
- 3M +0.02987 to 4.52100 (-0.02504 total last wk)
- 6M +0.03959 to 4.43150 (-0.00916 total last wk)
- 12M +0.04592 to 4.28835 (+0.02371 total last wk)
US TSYS: Repo Reference Rates
- Secured Overnight Financing Rate (SOFR): 4.57% (-0.01), volume: $2.425T
- Broad General Collateral Rate (BGCR): 4.56% (-0.01), volume: $833B
- Tri-Party General Collateral Rate (TGCR): 4.56% (-0.01), volume: $799B
- (rate, volume levels reflect prior session)
STIR: FRBNY EFFR for prior session:
- Daily Effective Fed Funds Rate: 4.58% (+0.00), volume: $104B
- Daily Overnight Bank Funding Rate: 4.58% (+0.00), volume: $282B
FED Reverse Repo Operation
RRP usage climbs to $200.030B this afternoon from $172.400B Friday. Compares to $144.243B on Tuesday, November 5 -- the lowest since May 6, 2021. The number of counterparties rises to 59 from 51 prior.
MNI PIPELINE: $3B Morgan Stanley 31NC10 Debt Priced
- Date $MM Issuer (Priced *, Launch #)
- 11/18 $3B *Morgan Stanley 31NC10 +93
- 11/18 $2B #Vulcan Materials $500M 5Y +70, $750M 10Y +95, $750M 30Y +112
- 11/18 $1.5B #General Mills $750M 5Y +70, $750M 10Y +90
- 11/18 $1B #Sempra $400M 30NC5 6.625%, $600M 30NC10 6.55%
- 11/18 $1B #EOG Resources 30Y +107
- 11/18 $850M Select Medical 8NC3 6.25%
- 11/18 $Benchmark Hyatt 2029 tap +90, 7Y +107
- 11/18 $Benchmark American Tower +5Y +80, +10Y +105
- 11/18 $Benchmark Republic of Turkiye +5Y Sukuk
- 11/18 $Benchmark Emirates NBD 5Y Reg S Roadshow
- 11/18 $Benchmark Alibaba investor calls for US$ 5.5Y, 10.5Y, 30Y, in addition to CNH backed debt over 4 tranches.
MNI BONDS: EGBs-GILTS CASH CLOSE: Bear Flattening In Germany As ECB Cuts Fade
European curves flattened Monday, with Bunds underperforming Gilts.
- Yields rose for most of the morning session , with pronounced weakness at the German short end as ECB rate cut pricing pulled back some of its recent increase.
- ECB's Stournaras noted that a December cut was more or les a "done deal" - drawing a hawkish reaction given partial market pricing for a 50bp cut, and Stournaras's pointing out that neutral rates could lie at 2% (115bp from here). At one point just 136bp of further cuts were seen through 2025.
- Bonds stabilized in the afternoon, shrugging off a supply-disruption related jump in oil prices, as equities and the US dollar softened.
- The German curve bear flattened, with the UK's twist flattening. Periphery EGB spreads tightened slightly, after widening midway (BTPs/Bunds came in 3+bp from session wides).
- Tuesday's calendar includes Eurozone current account data and final October HICP, as well as appearances by senior BOE members including Gov Bailey. The week's European data highlights come Wednesday (UK CPI) and Friday (November flash PMIs).
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 5.9bps at 2.181%, 5-Yr is up 2.7bps at 2.203%, 10-Yr is up 1.7bps at 2.373%, and 30-Yr is up 0.5bps at 2.579%.
- UK: The 2-Yr yield is up 1.8bps at 4.417%, 5-Yr is up 0.8bps at 4.336%, 10-Yr is down 0.6bps at 4.465%, and 30-Yr is down 1.2bps at 4.912%.
- Italian BTP spread down 0.2bps at 119.6bps / Spanish down 0.4bps at 69.7bps
MNI FOREX: Softer Greenback Sees EURUSD Edge Back Towards 1.06
- Following the greenback rally pausing for breath on Friday, the USD index also trades softer to start the week, currently down around 0.35% as we approach the APAC crossover. The price action has been assisted by a more stable backdrop for global equity indices, as well as the US 10-year yield once again firmly rejecting the 4.50 level and now residing lower on the day.
- The EUR trades more optimistically, rising to levels around 1.0600 against the dollar, the notable breakdown point during last week’s trade. The 0.5% move higher for EURUSD does little to alter the overall bearish backdrop, and might be allowing an oversold condition to unwind. On the downside, focus remains on a move to 1.0448, the Sep 3 2023 low and a key support, whereas initial firm resistance to watch is 1.0742, the 20-day EMA.
- The JPY is among the weakest in G10, briefly helping USDJPY gravitate back above the 155.00 handle, with the currency receiving little support from an appearance from BoJ's Ueda, who declined to provide a clear indication or time-linked path for the next BoJ rate hike.
- USDCAD has continued its pullback today with a now sizeable drop settling around the 1.4030 level (-0.43%). CAD gains closely follow other growth sensitive peers in the AUD and NOK, along with EUR, potentially offering a slightly less stretched level heading into tomorrow’s Canada inflation report. Support isn’t seen until 1.3959 (Nov 1 and 6 highs)
- Market focus remains on Trump's cabinet picks, with the Treasury Secretary position still up for grabs. Latest reports suggest that Trump's shortlist is growing, and he is to hold interviews this week with the leading candidates, including (but not limited to) Scott Bessent, Howard Lutnick, Kevin Warsh and Marc Rowan. Their perceived support for Trump's tariff regime will prove key to any market reaction on the formal appointment.
- RBA minutes headline the docket overnight before the final readings of Eurozone CPI on Tuesday. Attention will then turn to Canada CPI and US building permits data.
TUESDAY DATA CALENDAR
| Date | GMT/Local | Impact | Country | Event |
| 19/11/2024 | 0845/0945 |  EU | ECB's Elderson at 10th Green Finance Forum | |
| 19/11/2024 | 0900/1000 | ** | EU | EZ Current Account |
| 19/11/2024 | 1000/1100 | *** | EU | HICP (f) |
| 19/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 19/11/2024 | 1000/1000 | GB | BOE's Bailey, Lombardelli, Mann and Taylor at TSC | |
| 19/11/2024 | 1330/0830 | *** |  CA | CPI |
| 19/11/2024 | 1330/0830 | *** |  US | Housing Starts |
| 19/11/2024 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 19/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 19/11/2024 | 1810/1310 | US | Kansas City Fed's Jeff Schmid | |
| 20/11/2024 | 2350/0850 | ** |  JP | Trade |
| 20/11/2024 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |